Ahead of the Open (VIP) -- April 23, 2014

April 23, 2014 03:19 AM
 

Corn futures are called 1 to 2 cents higher on light followthrough buying.

  • Corn futures favored a firmer tone overnight, ending the session marginally to 1 cent higher.
  • Traders are keeping a close eye on the weather after Monday's crop progress data revealed the corn planting season was off to a slower-than-expected start. Yesterday's NWS 6- to 10-day forecast calls for much-below-normal temps across the heart of the Corn Belt and a mix of precip.
  • Otherwise, there's little other fresh news for the market to digest this morning as traders wait on tomorrow's weekly export sales data from USDA.
  • Gulf corn basis is steady this morning, which suggests supplies and demand are in balance.
  • A weaker tone in the U.S. dollar index also helped to support corn overnight.
  • Also this morning, USDA announced that China has purchased 120,000 MT of U.S. sorghum for 2013-14, which traders suspect replaces some of the rejected U.S. corn.

 

Soybean futures are called mixed, with nearbys weaker amid bull spread unwinding.

  • Old-crop soybean futures ended the overnight session 3 to 9 cents lower, with new crop futures 1 to 3 cents higher bull spread unwinding.
  • Nearby futures were again pressured by news two Brazilian cargoes that were originally sold to China are headed to the U.S. Southeast.
  • While traders are reacting negatively to the news, it shouldn't a surprise after USDA increased its 2013-14 soybean import projection earlier this month.
  • Meanwhile, China's preliminary purchasing mangers' index (PMI) upticked to 48.3 this month. But this still points to contraction in the nation's manufacturing sector. Factory output and new orders continued to fall, maintaining concerns about a slowdown in economic growth.
  • Gulf corn basis is steady to 1 cent firmer this morning for nearby delivery to reflect the tight old-crop stocks situation.

 

Wheat futures are called to open mostly 3 to 5 cents lower as traders reevaluate positions.

  • SRW wheat ended the overnight session 3 to 5 cents lower, with HRW down 3 to 6 cents and HRS mostly 2 to 4 cents lower.
  • Rains for the Plains in the near-term forecast has limited buying in wheat futures to short-covering, although another dose of cold temps is in the forecast for the next 6 to 10 days according to the National Weather Service.
  • The NWS 6- to 10-day forecast also calls for below-normal precip across the HRW Wheat Belt, which signals another period of crop stress is ahead.
  • A weaker tone in the U.S. dollar index should help to limit pressure on wheat futures this morning, although traders expect tomorrow's weekly export sales report to reflect a slowdown in demand due to concerns U.S. wheat is not competitively priced.

 

Live cattle futures are called to open weaker after slight pressure overnight.

  • Live cattle futures were under light pressure in overnight trade as traders wait on cash trade to develop.
  • Continued strength in the boxed beef market yesterday suggests the market has found a near-term low, as Choice values rose $2.15 yesterday and Select rose $1.55. But movement slowed to 118 loads. Traders will be watching movement closely as retailers purchase for "Beef Month" in May.
  • This week's cattle showlist is down in Texas from last week, but slightly higher in Kansas. Farther north, supplies are more abundant in Nebraska and Colorado compared to week-ago.
  • This week's cash trade is still uncertain as packers' profit margins remain in the red. Pressure on nearby futures, however, should be limited by the $2-plus discount April holds to last week's cash trade.

 

Lean hog futures are called to open lower on weakness in the pork market.

  • Lean hog futures saw light pressure in overnight trade due to weakness in the pork market.
  • Pork cutout values slipped $2.40 yesterday on moderate movement of 323.55 loads. Traders say this suggests there is more near-term downside weakness in the pork market as it searches for a price level that increases movement.
  • Due to weakness in pork values, packers are working to improve profit margins, which is expected to result in steady to mostly weaker cash hog bids today.
  • The CME lean hog index is projected at $118.48 and May lean hogs ended yesterday at around a $2.50 premium to the index.
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